My Cup Of Liberty

The Philippines’ average merchandise trade deficit in 2018 was $3.6 billion a month, went down to $3.1 billion a month in 2019. The US and Japan remain the Philippines’ main exports market while China remains our main source of imported goods.

While we have generally balanced trade with the US, Japan, and Germany, that cannot be said of the rest of our Asian neighbors including our ASEAN partners. Our biggest trade deficits are with China, South Korea, Indonesia, and Thailand (see Table 1).

The main reason for this is that while tariff rates with our Asian neighbors are declining — with zero tariffs within the ASEAN — the non-tariff measures (NTMs) are increasing. The challenge for freer trade should focus on these NTMs.

In global trade, data from the World Trade Organization (WTO) show that the top three players are also the biggest economies in their respective continents — China, the US, and Germany. But the US suffers the biggest trade deficit overall, with an average deficit of $2.6 billion/day in 2018, while China and Germany have an average trade surplus of $1 billion/day and $0.8 billion/day, respectively.

In the ASEAN, our five neighbors belong to the top 30 world exporters and importers in 2018. Meanwhile, the Philippines ranked No. 47 in exports and No. 34 in imports (see Table 2).

We now go to the spreading coronavirus. China, the exports powerhouse, is also ground zero of SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2) which causes Coronavirus Disease 2019 (COVID-19), and the economic dislocations there in the first two months of 2020 are huge, with many big cities looking like ghost towns and having minimal economic activities including near-zero manufacturing.

China’s exports are other countries’ consumer goods or raw materials and intermediate goods, even capital goods, for their manufacturing, agriculture, and services sectors. The same way that China’s imports are other countries’ exports of mining, manufacturing, agriculture products.

Trade diversification, and investment and tourism diversification are already happening — but at a slow rate. For instance, Philippine companies that relied heavily on imports from China have to adjust and substitute imports from Vietnam and other ASEAN neighbors whenever possible.

While COVID-19 will take care of the Philippines’ huge trade deficit with China, our ASEAN neighbors must relax or reduce their NTMs vs Philippines exports to them.

In the new report, the International Trade Barriers Index 2019 produced by the Property Rights Alliance in Washington, DC, out of 86 countries covered, the Philippines ranked 78th or near the bottom. We scored high in NTMs (meaning we do not have many NTMs) but we scored low in tariffs, services restrictions, and trade facilitation.

The Philippines should not reciprocate with high NTMs against its Asian neighbors, rather everyone should reduce their respective NTMs. And the Philippines should address its problems and bureaucracies in services restrictions and trade facilitation. That is the way to freer trade and a more prosperous world. More prosperity will give us more resources to address COVID-19 and emerging or future communicable diseases.


Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers.